The Seven Things Young Adults Need to Know About Money
Darren Pries-Klassen, MFC & Madalyn Metzger, MMA
Whether
or not we like it, money is a central part of our everyday lives. And
for today’s youth and young adults, money will continue to become more
and more important as the years go by.
Consider the impact money has when it comes to major life choices,
like attending college or university and pursuing a career. How much
does tuition cost? What kind of financial aid package do they have? And
once you’ve graduated, what’s the average salary for the field you’re
interested in pursuing?
It’s difficult to come up with things that drive our society or
catch our attention more than money. So, to help you on your journey,
here are seven things you need to know about money:
1. Money talks… God is listening
The way we spend our money sends a message about our lifestyles and our values.
So, what is God hearing from you? Think about the brands and styles you purchase, and what messages they may be conveying. Why do you purchase those brands? Do the companies you frequently purchase products from contribute to our society’s pollution problems, or are they ecologically friendly? Do they pay their local and global employees a fair wage? Do their values match up with your values?
God has given us an uncountable supply of gifts, including the gift of money. As stewards of this gift, it’s our responsibility to care for and maintain it in ways that show love and respect for God and His creation.
2. Are you consuming culture?
Watch any television advertisement, and you most certainly won’t be told that you should buy fewer things. That’s just not the way our society works, and it’s not what manufacturers want you to hear. In fact, today’s youth and young adults are more heavily targeted by advertisers than any other generation, which has led to a constant evolution in advertising. So, the next time a commercial grabs your attention, stop and think why. Deconstruct the ad and what it’s trying to sell you. By doing this, you can make intelligent choices, informed by your values.
3. Find contentment
Today’s culture would lead us to believe that “contentment” is defined as spending money you haven’t earned to buy things you don’t need to impress people you don’t know. It can be easy to get caught up in what’s out there for us to buy – and how those things might bring out the best in life.
But, looks can be deceiving, as it says in Romans 1:23: “They traded the glory of God who holds the whole world in his hands for cheap figurines you can buy at any roadside stand” (The Message). The things we buy may seem like they bring our lives contentment – but the reality is that we’re diminished spiritually anytime we put our faith in things other than God. Without a basic understanding of stewardship – that we are merely caretakers of what God has blessed us with – we tend to form an attachment to our money and possessions.
So, how can you find contentment in our consumer-driven society? Well, you can start by defining “needs” versus “wants” before you make a purchase. Take, for example, a car. It may be practical for you to have a car to get to and from school and/or work. You may need a small, used vehicle in order to accomplish this goal. But you may want a brand new sport utility vehicle. Weigh the pros and cons – the needs and wants – before you spend the money.
4. Spend less than you earn
Most financial problems are a result of overspending, not lack of income. When you spend more than you earn you will eventually need to borrow money to cover your expenses. Borrowing involves debt which needs to be repaid and requires additional income to cover living expenses plus the new debt. Overspending and debt create a vicious cycle which is hard to get out of once it starts.
The importance of understanding debt and repayment, while learning to save first and buy later, can not be overstated. By planning your spending ahead of time and avoiding impulse purchases you will be well on your way to avoiding the debt cycle. Hebrews 13:5 says, “. . . keep your lives free from the love of money and be content with what you have . . .” Overspending and debt may be signs of a lack of contentment.
5. Plan your spending
Yuk! that sounds like “budgeting”. Relax; it doesn’t have to be painful or complicated. You already know that some of your paycheque is held back for taxes and government benefits. You need to know how much of it is left and then plan your expenses so that they do not exceed this amount.
The best place to start is by tracking your spending. Ask for a receipt each time you purchase something – anything. You’ll be amazed at how quickly a dollar here and a dollar there can add up. If you can track your spending for a minimum of 60 days you will begin to see trends in spending habits. You will also begin to see areas where you can begin to make some spending changes. Things like rent and groceries tend to be more consistent but there is no limit to how much you can spend on entertainment, restaurants, clothing, and having fun. Be prepared to make some changes in these areas so that you are better able to meet your needs.
Two other things are needed in any spending plan: offerings and savings. Giving money to the church out of gratitude for all that God has done is what Christians are called to do. God is less concerned about the amount you give than the attitude with which you give it. If giving is a new thing for you, start small and prayerfully ask God to guide your giving. If you wait with making a gift until “you have enough”, you never will. You’ll be amazed at how much you can give and still have enough to meet your needs. God’s calculator seems to work a little differently than yours or mine.
Saving money for both short and long term goals is also important. Purchases like vehicles and education require some planning. Retirement may feel like it is so far away there is no point in starting now. The reality is that there is no better time than “now” when it comes to long term financial planning. Starting to save money early, even a small amount, can grow to an incredible amount for later stages of life.
6. Save now. Buy later.
Our consumerist society would like to tell you the opposite. But now and pay later seems to be the message of most retailers. Unfortunately many people have listened and gotten themselves into incredible debt trouble. By practicing a little “delayed gratification” you can avoid a tremendous amount of financial headache.
Make a list of things you would like that require more money than your spending plans allows. Now classify each one of these items into either a “needs” or “wants” column. Funny how some things can fit into both columns isn’t it? When would you like to do these things and how much will each one cost? You may not be able to do everything on your list but that is perfectly normal. Pick an item, divide the total cost of that item by the number of months from now you would like to do it and you now have a monthly goal for short term savings. For example, you’d like to buy a dependable vehicle in two years for work. You estimate that it will cost about $6,000 to cover cost including taxes. $6,000 divided by 24 months equals $250/month. Don’t forget that buy putting a little money away each month it can earn interest which means you’ll either reach your goal earlier or you can decrease your savings each month by a few dollars and still reach your goal.
7. Know debt.
While the best debt might be “no” debt, there may be times in your life when debt is unavoidable. The key is understanding the difference between “good” debt and “bad” debt.
The characteristics of good debt are a low interest rate and that it is used to purchase something with a reasonable chance of increasing in value or providing income. Borrowing money to get an education to get a well paying job might be a “good” debt but that doesn’t mean you should spend borrowed money with reckless abandon. Paying off debt, even a small amount, is difficult. Besides, what guarantee do you have that you’ll get the job you want? Borrowing money to buy a house might be a good idea. Most homes increase in value over time but carefully evaluate the amount of house you actually need.
Bad debt is characterized by high interest rates such as credit and retail cards. Using borrowed money to buy something that decreases in value or to maintain a lifestyle are also characteristics of bad debt. An example of using bad debt is buying a pair of jeans using your credit card and not paying the credit card bill in full when it arrives. The interest you will be charged will be very high and it is using borrowed money to maintain a lifestyle.
Article derived from the 2007 presentation of the same name at the MEDA conference in Toronto, ON, Canada